What happens to your franchise if your franchisor goes into administration or bankruptcy? Franchise solicitor Robert Bedford of Cubism Law offers his insights.
Most franchise contracts will deal with the situation where a franchisee cannot pay their way (generally the franchisor has the option to terminate), but very few deal with the effect on the relationship if the franchisor finds itself in similar circumstances. In the current economic climate and, with established brands such as Coffee Republic and O’Brien’s Sandwich Bars having entered into administration in recent years, this is no idle question.
Franchisors are unlikely to simply disappear overnight and there is every chance that, as with the companies mentioned above, they will initially be placed into administration. During this phase, an administrator will be appointed to take over management of the business and attempt to turn its fortunes around. Full post.